© Copyright 2017 by K&L Gates LLP. All rights reserved.
Sabina Kalyan, Global Chief Economist and Head of EMEA Strategy & Market, CBRE Global Investors James Green, Partner, K&L Gates LLP, London Gaimin Nonyane, Head of Economic Research, Ecobank Adri Kerciku, Investment Consultant, M3 Capital Partners (UK) LLP Mike Phillips, UK Editor, Bisnow Nathalie Villette, Group Head, Global Corporates, Ecobank
Global Real Estate Trends, Africa and Opportunities for 2017/2018
Tuesday 12th September 2017
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 1
PRESENTED TO:
REAL ESTATE OUTLOOK SEPTEMBER 2017
CONFIDENTIAL AND PROPRIETARY
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 2
THE GDP FORECASTS ARE BENIGN, IF BECOMING LATE CYCLE
The Eurozone is lagging the US and UK and will thus outperform over the medium term
-1
0
1
2
3
4
5
6
7
Eurozone Japan UK Australia Singapore Hong Kong Canada USA China
GDP Forecasts Compared To The Estimated Trend Rate Of Growth, %. Source: Oxford Economic Forecasting,.
Estimated Trend Rate 5 Year Forecast Difference
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 3
WITHIN EMEA, THE GDP THE RANKING MAY SURPRISE YOU
With the exceptions of the UK and Norway, the forecasts are weaker as we move later cycle
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
GDP Forecasts, % Y/Y Average 2017-2021 and 2018-2022. Source: Oxford Economic Forecasting,.
2017-2021 2018-2022 Difference
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 4
WITH INFLATION WEAK, MONETARY POLICY WILL TIGHTEN SLOWLY
The Eurozone and Japan will have the most accommodative monetary conditions
-1
0
1
2
3
4
5
6
7
8
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Central Bank Policy Rates, %. Source: Oxford Economic Forecasting.
USA
Australia
Canada
UK
Eurozone
Japan
0.0
0.5
1.0
1.5
2.0
2.5
Consumer Price Inflation, % Y/Y, Average, 2017-2021.
Source: Oxford Economic Forecasting,.
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 5
GLOBAL INVESTMENT VOLUMES ARE FALLING BUT REMAIN HISTORICALLY HIGH
London in particular has been propped up by Asian capital
0
50
100
150
200
250
300
07 08 09 10 11 12 13 14 15 16 17
Global Transaction Volumes, USD Billions.
Source: Real Capital Analytics.
EMEA Americas Asia Pac
0%
10%
20%
30%
40%
50%
60%
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Sources of Cross Border Capital, 12 M Rolling, % Of Total. Source: Real Capital Analytics.
Asia-Pacific Europe North America
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 6
LONDON HAS LOST ITS #2 SPOT AND THE GERMAN METROS ARE CLIMBING FAST
Paris has been impacted (temporarily?) by the elections, San Francisco by pricing
0
5
10
15
20
25
Global Transaction Volumes, USD Billions, H1 17. Source: Real Capital Analytics.
Asia Pac
Americas
EMEA
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 7
WITH PRICING HOT, LOGISTICS AND NICHE SECTORS HAVE INCREASED VOLUMES
These are global trends, but particularly pronounced in EMEA
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Office Retail Industrial Other
Sector Shares In Investment, % Of Total.
Source: CBRE.
H1 17 Average since 2006
-80
-60
-40
-20
0
20
40
60
80
100
08 09 10 11 12 13 14 15 16 17
EMEA Investment Volumes, % Y/Y, 1 Year Moving Average. Source: CBRE.
Office Retail Industrial Other
The Industrial number spikes because Blackstone sold its European industrial arm “Logicor” to CIC for around EUR 12.2 bn and Hansteen sold a German/Dutch portfolio of EUR1.3 bn to Blackstone/M7.
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 8
PRIME YIELDS ARE AT RECORD LOWS BUT STILL OFFER VALUE RELATIVE TO BONDS
Capital values per square metre are also attractive in many markets
3
4
5
6
7
8
9
10
86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
EU-15 Prime Valuation Yields, %. Source: CBRE.
Industrial OfficeRetail Industrial trend
-600
-400
-200
0
200
400
600
800
86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
EU-15 Income Premia Over Sovereign Bonds, Basis Points. Sources: CBRE &
Thomson Reuters.
Industrial Office Retail
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 9
A KEY QUESTION IS WHETHER UK CITIES ARE NOW ATTRACTIVE RELATIVE TO CE
Yield compression remains strong in German cities and Madrid and Milan
-200
-150
-100
-50
0
50
100
150
200Prime Office Yields In Q2 17 Compared To Previous Cyclical Trough, Basis Points.
Source: CBRE.
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 10
PRIME RENTS ARE RECOVERING BUT SECONDARY IS STILL LAGGING
There is a wide gap between prime and secondary retail in particular
50
100
150
200
250
300
86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
EU-15 Prime Real Rent Indices, 1986=100.
Source: CBRE.
Industrial OfficeRetail Industrial trend
-20
-15
-10
-5
0
5
10
15
20
25
86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
EU-15 Prime Real Rent Indices, 1986=100.
Source: CBRE.
Industrial Office Retail
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 11
Dominant, Experiential Retail Venues
Niche residential and under-supplied markets
EMEA: PREFERRED INVESTMENT THEMES
Office Recovery and Evolution State-of-the-Art Distribution Centers
European
Preferred
Investment
Themes
Shortage of modern space in city centres combined with strong demand from media and tech companies in emerging locations
Preferred Markets
Amsterdam South Axis Berlin Stockholm & Oslo Madrid & Barcelona For higher risk-adjusted return investors
– Budapest
Shortage of modern facilities and strong demand driven by e-commerce
Preferred Markets
Major NW European markets Warsaw and Czech Rep Barcelona, Madrid, Milan
Retailers are concentrating their presence in dominant retail locations/formats
Preferred Markets
Central London & Paris high street retail NW European dominant shopping centres
with asset management potential Southern Europe for yield compression & rent
growth
Demographic trends combined with shortage of supply for Independent/assisted living facilities and student accommodation
Preferred Markets
Student housing in NW Europe Senior living in the UK Dutch social housing given regulatory
change
www.cbreglobalinvestors.com
The information in this document is confidential and meant for use only by the intended recipient. This material is intended for informational purposes only, does not constitute investment advice, or a recommendation, or an offer or solicitation, and is not the basis for any contract to purchase or sell any security, property or other instrument, or for CBRE Global Investors to enter into or arrange any type of transaction. This information is the sole property of CBRE Global Investors and its affiliates. Acceptance and/or use of any of the information contained in this document indicates the recipient’s agreement not to disclose any of the information contained herein.
© Copyright 2017 by K&L Gates LLP. All rights reserved.
Africa – an Introduction
James Green
The “real” world map
Source: http://rue89.nouvelobs.com/2013/12/21/lafrique-grandeur-nature-carte-bouscule-les-idees-recues-248512
• Fifth largest economy in the world after US, China, Japan and Germany
• IMF projects Africa will be world’s second-fastest growing economy to 2020
• World-class oil & gas/ mineral assets
• Young and growing population - by 2034, larger workforce than either China or India
• Consumer industries expected to grow by US$410bn between 2013 - 2020
• Fastest growing and second largest mobile phone market in the world
• Increasing urban migration
The importance of Africa
• Corruption
• Political instability
• Resource nationalism
• Energy shortages
• Lack of infrastructure
• Currency fluctuations
• Under-developed legal systems
• Restrictions on foreign investment
Barriers
Economic Dynamics in Africa’s Real Estate
Sector Gaimin NonyaneEcobank Group
September 2017
© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
Source: UN; Ecobank Research
• SSA’s growth averaged 5.2% p.a. in 2010-15 driven by growth in the non-mining sector, which accounted for 89% of the expansion in SSA growth.
• Non-mining sector has been boosted by revenue from the commodity boom, specifically agriculture, trade, transport and ICT and other activities, which include real estate and financial services.
• Manufacturing and construction have lagged the broader sectors.• In recent years, SSA growth has slowed amid the commodity-price shock and tight lending conditions.• Markets are now adjusting to low growth rates as economic diversification efforts to broaden growth
gains traction and as tight lending conditions continue.
SSA growth decomposition (2010-2015) Attribution analysis of average growth, 2010-15
2
24.5%
15.9%
15.6%
13.8%
10.5%
10.5%
9.1% Other Activities
Trade, restaurants &hotelsTransport & ICT
Agriculture
Mining & Utilities
Manufacturing
Construction
SSA’s changing landscape as markets adjust to shocks
© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%
2010 2011 2012 2013 2014 2015
Agriculture Mining & Utilities
Manufacturing Construction
Trade, restaurants & hotels Transport & ICT
Other Activities SSA (rhs)
Source: UN
Real Estate (% of GDP)
Real estate share of SSA GDP is relatively small• Real estate accounts for an average of 6% of SSA GDP • Countries with higher per capita income appear to have larger shares
3© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Eth
iopi
aS
ierr
a Le
one
Mau
ritan
iaC
ôte
d'Iv
oire
Ken
yaG
ambi
aM
alaw
iM
ozam
biqu
eN
iger
Zim
babw
eG
hana
Gui
nea-
Bis
sau
Bur
kina
Fas
oM
ali
Uga
nda
Sw
azila
ndC
had
Tanz
ania
Sao
Tom
e &
Prin
cipe
Gui
nea
Cam
eroo
nB
enin
Ang
ola
Nam
ibia
Togo
Zam
bia
Nig
eria
Bur
undi
Bot
swan
aLe
soth
oM
aurit
ius
Sou
th A
frica
Mad
agas
car
Sen
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Rw
anda
Cab
o V
erde
Eq
Gui
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Com
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Gab
on
Key factors undermining growth in real estate• Structural constraints: weak property rights regime, poor town
planning systems and a still developing financial sector.
• Restrictions on foreign capital repatriation and an inefficient tax system affect the involvement of foreign interest and private capital.
• High interest rates which undermine the development of SSA’s
mortgage finance system.
• Currency volatility which tend to dampen foreign investment to real estate.
• But foreign interest has started to rise in recent years in the hotel and
retail shopping malls sector amid modest financial sector reforms.© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
But SSA climate still ripe for more real estate activity
© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
Source: PWC, Building the Future of Africa
SSA has huge potential – market sizes to grow over M/T
6
Source: IMF
Expected Market Expansionaverage nominal growth rate per annum, 2017-21
0 2 4 6 8 10 12 14 16
Togo
Liberia
Congo, Rep.
Ghana
Ethiopia
Niger
Kenya
China
Burkina Faso
Benin
Tanzania
Mozambique
Senegal
São Tomé and Príncipe
Côte d'Ivoire
Sierra Leone
India
Nigeria
© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
• providing businesses with opportunities to take advantage of economies of scale and scope
Income levels to rise, boosting consumer sectors
7
• Consumer market is developing - Per capita GDP at PPP to rise steadily (besides Equatorial Guinea), boosting consumer sectors
• But to still lag behind resource-intensive markets such as China and India
Per Capita Income, at Purchasing Power Parity, US$
Source: IMF
© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
0
10,000
20,000
30,000
40,000
50,000
60,000
0
5,000
10,000
15,000
20,000
25,000
30,000
2014 2015 2016 2017f 2018f 2019f 2020f 2021f 2022f
Gabon
China
India
Cabo Verde
Republic of Congo
Angola
Nigeria
Ghana
Côte d'Ivoire
Zambia
Kenya
Equatorial Guinea (rhs)
8
East African countries dominate banks’ lending to real estate
Source: Ecobank Research
0
5
10
15
20
25
30
35
40
2010 2011 2012 2013 2014 2015 2016
Rwanda Uganda Kenya Ghana Nigeria Tanzania Zambia Zimbabwe UEMOA
© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
Banks’ lending to real estate and construction sector (percent of total loans), 2010-16
Real estate investment example yields
Date Property Location Sector Seller Buyer
Estimated
price (US$
million)
Reported
yield
Q4 2015 Ikeja City Lagos, Nigeria Retail Actis/RMB
Westport/Paragon
Hyprop (75%)/
Attacq (25%)91 >8.00%
Q2 2015 Two Rivers Development
(39% stake)Nairobi, Kenya Mixed Use
Centrum Aviation
Industry
Corporation of
China70 N/A
Q4 2015
East Park Mall, Acacia Office
Park & Jacaranda Mall (50%
stakes)
Lusaka &
Ndola, ZambiaRetail/ Office Casilli Group SA Corporate 49.6 8.68%
Q2 2015Wings Oando Development
(37.1% stake)Lagos, Nigeria Office RMB Westport Pivotal 49 N?A
Q3 2016 Vodacom Building Maputo,
MozambiqueOffice
Office Sociedade De
Construçoes
Catemba
Delta (now Mara
Delta)46 6.63%
Q4 2016Cosmopolitan Mall (50%
stake)Lusaka, Zambia Retail Rockcastle Mara Delta 37.1 7.75%
Q4 2015 Bagatelle – Mall of Mauritius
(34.9% stake)
Bagatelle,
MauritiusRetail Atterbury Ascencia 28.9 7.00%
Q4 2015 Makuba Mall & Kafubu Mall
(50% stakes)
Kitwe & Ndola,
ZambiaRetail Rockcastle
Delta (now Mara
Delta)21.6 7.75%
Q4 2015 Greenspan Mall Nairobi, Kenya Mixed UseGreenspan Mall
Limited
Stanlib Kenya
Fahari I-REIT20 8.10%
Q1 2016 Barclays House Ebene,
MauritiusOffice Jade Group
Delta (now Mara
Delta)13.4 8.30%
Source: Knight Frank
© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
Thank you
© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
© Copyright 2017 by K&L Gates LLP. All rights reserved.
Sabina Kalyan, Global Chief Economist and Head of EMEA Strategy & Market, CBRE Global Investors James Green, Partner, K&L Gates LLP, London Gaimin Nonyane, Head of Economic Research, Ecobank Adri Kerciku, Investment Consultant, M3 Capital Partners (UK) LLP Mike Phillips, UK Editor, Bisnow Nathalie Villette, Group Head, Global Corporates, Ecobank
Global Real Estate Trends, Africa and Opportunities for 2017/2018
Tuesday 12th September 2017